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tv   Bloomberg Markets Americas  Bloomberg  November 17, 2016 10:00am-11:01am EST

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london. janet yellen is walking in right now to testify before the congressional joint economic committee. it is on the economic outlook for the united states. we already have prepared remarks. mark: we did. some headlines include yellen saying a rate hike will be appropriate relatively soon and there appears to be scope of more labor market gains. we will bring you yellen's remarks and questioning from 24 members of congress over the next two hours. vonnie: let's go to washington, where chris condon has more on chair yellen's remarks. she is keeping the federal reserve on track for a december rate increase, isn't she? chris: i think that is right. you can circle december 14 in your calendar if you have not already. the fed is likely to raise rates by a quarter percentage point. she used that term relatively soon in reference to a rate hike
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and even made a nod to some of the hawks on the committee, talking about the risks of moving to a -- too late. that is number one. beyond that, number two, it is fair to say she is keeping people on the same path that the committee has already set out for 2017, a gradual rate increase after this expected height. ?onnie: what does gradual mean to next year, 30 next year -- two next year, three next year? chris: the last time the committee laid out its projections, the median called for two hikes in 2017. as far as this testimony, this keeps it very clearly on that half, but the wildcard here is the potential policy that the term administration is going to introduce, infrastructure spending, tax cuts, trade
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policy, all of these could affect the rate going forward. yellen will probably very careful not to make any specific remarks about her expectations there, but she is likely to be pressed by members of the committee of how the fed might react. again, she will try to avoid specifics, but i think it is reasonable to expect she will have to knowledge that there is new stimulus coming into the economy from the fiscal side, the fed is going to want to offset that with higher rates, so that is potentially meaningful more rapid upward pace for rates in 2017 or 2018. to facee is likely questions about the independence, given the success of donald trump in the election. chris: i think it is difficult
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to know exactly what members of the committee are going to ask, but if the past is any signal, you are likely to see democrats give her a friendly opportunity to emphasize how important that independence is. you remember there were members of congress on the republican side that introduced legislation on the past that the fed believes threatens the independence and now it republican president and congress, that becomes a bigger threat. thewill want to underline value of an independent monetary policy. vonnie: thanks, chris. he will check in in a little bit . that is the chairman of the committee speaking right now. we are about 30 minutes into the trading day. let's go to julie hyman. have had those remarks and not a crazy reaction. julie: nothing that shocking in the comments.
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janet yellen said we are almost ready to raise rates and that is not really going to have a big impact in the markets. of ang in a 94% chance rate increase in december. we could see movement around to remarks or responses to the question and answer session. a little lift in the major averages but not that much movement overall. more of an oil driven trade today. if you look at the imap on the bloomberg, energy is the best performing group, followed like financials, with the big run-up since the result of the election. down, healthgroups care slightly and consumer staples, so broad-based rally, even if it is not that big. rise,l prices are on the driving that big increase in energy shares. oil bouncing again today. that is as we approach a meeting with some opec nations, as well as russia, and the saudi arabia oil minister optimistic that opec can reach some kind of
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production agreement, even though it looks like market waned.pant has waxed and we have been watching the bond market. we had a lot of economic data this morning, most positive very jobless claims falling to the lowest since 1973. housing rising the most since 1982. we saw an increase in bond yield , six basis points on the 30 year and a spread widening for the first time in the weeks. if you look at housing stocks today, outperformance there, trading higher. mark: another performance for european stocks, failing to maintain that momentum they shared the day after -- they showed the day after the trump victory. alls relative to the country world index in five months. once again, we alternate between gains and losses for the eighth straight day, the longest streak in two years. we are up and oil companies are
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among the best performing today. this is my favorite chart of the day. this is a chart showing the demand tod investors 10 year treasuries instead of bonds. we are at the widest since 1989. the expectation of trump infrastructure spending, sending ,onds down, yields higher chairman 10 year yields since the trump victory rose by 10 basis points, rising on monday to the highest. absolutely love that chart. this is the euro rising for the first day since the dollar. the eighth day losing stretch with the longest since may, 2012. the euro fell 4% in the most over the years. the median forecast over the end of the year is 105. look at the rsi, below 30, and tells you the euro is oversold. it has got to go above 30 to
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tell you it is time to buy the euro. we had some data in the u.k. sales surged more than expected in october, cooler weather boosting sales on winter fashion lines, sending clothing and footwear sales to the biggest increase in 2.5 years, jumping 1.9% versus 1.1% in september. the move the strongest since july. consumers continuing to fuel the economy. vonnie: we are continuing to monitor janet yellen's testimony before the joint economic committee on capitol hill, starting a few minutes ago, and we heard from the chairman. member, carolyn maloney from new york, is speaking. in a few minutes, fed chair janet yellen will deliver her prepared remarks. we are joined by chief economist at deutsche bank and senior position at ims and for global
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markets, thank you. does nothing to dispel the great increase in december today. >> correct. vonnie: how many next year? >> that is the key question. the market has now moved from pricing just one rate hike over the next three years to pricing approximately one rate hike per year for the next three years. that is still well short of what the fed has basically guided to and what i would argue is horribly appropriate. -- probably appropriate. vonnie: it feels like it would fall short forget economic growth and that doesn't factor in the trump presidency. binky: it depends on how you read the dots.
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so the market is slowly coming around to the fed's view. i would argue their view is probably if you read the description of what has happened in terms of economic development, it is still short of where the economy is likely to go. i am saying that the markets [indiscernible] and we should probably be at three or four year. mark: by the end of this year, 2300 for the s&p 500. what will be the driving force? you are suggesting a 5% rally through the end of 2015 -- 2016. drivershere are several of the valley, number one, if you put the close election outcome that we had, so far, it is tracking exactly, which is the market is flat starting in july and then post the election and uncertainties will dissipate and you get a 4% to 5% rally.
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i'm aware this is a popular narrative in the markets that have are the rally but you have to look at the index several times in the last six months. not reallyas happened. we have had huge moves across sectors that have basically been the main attention. mark: let's talk about the moves across sectors. 5020vely chat, g # btv which shows financials back to 2008. it shows us the average financial stock is at or above the 12 months part -- target price. if you look at what analysts are saying, these two groups are facing a bad profit slump. there you go. have we seen the gains for financials and industrials? financials, no.
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if you look at financials from relative to s&p 500, they are closely tracking the 10 year yield. it is the case and we had this sharp vertical move up and rates, banks had moved even further. on the financials, i would say they are modestly pricing in either higher rates or an amount of regulatory relief. to 5%,alking about 3% said these things cannot be estimated precisely for the sector as a whole. industrials have clearly run well ahead and are probably about 15% or so expensive relative to what are optimistic growth output has, so that clearly appears to be pricing in a fair amount of infrastructure a reasonably infrastructure spending packages. vonnie: what kind -- or can the u.s. economy take in terms of seeing this great chart that
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shows how long after the recession, deficit began to shrink. we imagine under donald trump, the deficit will not shrink and probably rise very to what point can arise before the economy suffers? binky: i think the final outcome of the policy package remains right now wide-open, and the question is, should you take the republican tax reform plan, which is the better way planned? that should not necessarily see a big increase in the deficit, so they still have to go through congress. the only plan i have seen from congress come i would not expect it to be a big increase in the deficit. vonnie: we heard monetary policy makers beg fiscal policy makers to do something to help the economy. are they going to get what they have been asking in donald trump? binky: the point i would make in the most important to keep in mind is that growth is already
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turning around, whether you look at earnings growth, gdp growth, isearnings growth, s&p 500 -7% in q1, minus three percent in q2, plus 3% in q3, plus for 5% by next year. tothe fed description looks be a little bit too backward looking, if you switch from earnings to looking at gdp q1, 1.5%e had 0.8% in in q2, and 3% in q3. the trajectory is clearly up. it is very well correlated with the liked impact on the u.s. dollar and oil shock that happened a while ago. the growth is already turning around. ,f you overlay on top of that in the risk when you have an employment at 5% of below, it is a big sharp increase in inflation. mark: fed chair janet yellen is
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reading her opening remarks. just a question on the dollar. you say the growth has reflected the drag of the dollar and oil, but since trump's victory, the is at itsdollar index highest since february and the keeps rising. what impact does that have on the fed and have on corporate earnings going forward? binky: i think what matters is the pace of increase in the dollar rather than just the level of the dollar, so if you look at the trade ready dollar against the g-10 currencies, it has been more shaped of 2015, in that tight 5% range. we moved a little above in january and we are on the to be -- on the tippy top of the range now. it means him was nothing in year-to-year terms, so you would have to get well outside that range. i just think that what we had in
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december 2014 and early 2015, which is a 20 plus percent movement in the trade and the dollar is extremely unlikely and in particular circumstances that created that. mark: what do we buy? i know you like long cyclicals, financial staples, talk us through this. binky: number one would be s&p general perception that there is lots of downside risk and the rally has already happened. i would argue it has not. number one, s&p 500. i think what is priced in for the fed is much too little and the best way to play that is through steepen errors in a futures curve, which is a way to play that they will have to tighten faster than a one rate hike per year, the current market pricing. within the equity market, we like very much the cyclicals,
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especially financials because i think the rates have much further to go and i think the defensive bubble, the inverse of rates, has also referred to sort of [indiscernible] vonnie: i was going to ask about correlations. you have just said rates are further to go, how far end when? binky: if you do a simple plot of the s&p 500 and the 10 year treasury yield over the last couple of years, it suggests that treasury yields have basically followed the very large disconnect that build up following the march fomc. q1, data came back in the fed said we are not hiking rates and expectations went down. the we had brexit and what expectation was that the central bank to do more, so there was a spike up in rates and a large cap tilt up and has almost caught up with the s&p 500. the s&p 500 10 year treasury
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yield should be a 2.4% when the market rallies. this relationship will eventually break down but i would argue the 10 year treasury yield is too low, so 2.4% is where we should be by the end of the year. if there is hike three times to four times next year, the markets price at one and we have plenty of outside within the next year. vonnie: thank you. get the fed chair janet yellen speaking in front of the joint economic committee of congress. yellen: the future overall inflation has been running closer to 1.2 -- 1.7 five quarter percent in regard -- regardarter percent in and the return to the objective
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over the next couple of years. this judgment reflects i viewed that monetary policy remains moderately accommodative and that ongoing job gains, along with low oil prices, should continue to support household purchasing power, therefore consumer spending. in addition, global economic growth should firm, supported but accommodated monetary policies abroad. as labor markets strengthen and transitory influences holding down inflation paid, i expect inflation to rise to 2%. i will turn to the applications of recent economic developments and economic outlook for monetary policy. policyance of monetary has supported improvement in labor markets this year, along with the return of inflation toward the fomc's 2% objective. in september, the committee decided to maintain the target
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range for the federal funds rate 1.25 to 1.5%.- at the increase in the target range strengthened, it would for the time we wait for further evidence of continued progress toward its objectives. at our meeting earlier this that, the committee judged the case for an increase in the target range had continued to strengthen, and that such an increase could become ifropriate relatively soon incoming data provides some further evidence of continued progress toward the committee's objectives. this judgment recognized the progress in the labor market and has continued and that economic activity has picked up from the modest pace seen in the first half of this year. and inflation, while below the
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2% objective of the committee, has increased somewhat since year.r in the furthermore, the committee judged that year -- near-term risks of the outlook were roughly balanced. waiting for further evidence is not reflected of the lack of confidence in the economy. unemploymentthe rate remaining steady this year, inflatione above bunny below its target, the committee judged that there was somewhat more room for the labor market to improve on a then thele basis committee had anticipated at the beginning of the year. nonetheless, the committee must remain forward-looking in monetary policy. where the fomc to delay increases in the federal funds rate for too long, but could end up having to tighten policy, relatively abruptly, to keep the economy from significantly
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both of the committee's longer run policy goals. moreover, holding the hydro funds rate at its current level for too long could also -- the federal funds rate and its current level for too long could undermine financial stability. expectc continues to that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability. this assessment is based on the view that the neutral federal funds rate, meaning their rate that is neither expansionary nor contractionary, and keeps the economy operating on an even keel, appears to be currently quite low by historical standards. view,tent with this growth and aggregate spending has been moderate in recent years, despite support from the
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low level of the federal funds rate and the federal reserve's longer-term securities. with the federal funds rate currently only somewhat below estimates of the neutral rate, the stance of monetary policy is likely moderately accommodative, which is appropriate to foster further progress toward the fomc's objectives. because monetary policy is only moderately accommodative, the risk of falling behind the curve in the near future appears limited and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years. outlooke, the economic is inherently uncertain, and as always, the appropriate task for the funds rate will change in response to changes in the outlook and associated risks.
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thank you. i would be pleased to answer questions. >> chair yellen, thank you for your opening statement. something caught my attention during that statement. that i have not in reading your statement earlier, had not just, intention trade you stated that the case when increase in the rates relatively soon, unless, the word unless part me up a bit, further evidence indicated the contrary. -- are the to you is results of the election -- does that fall in the category of less fomc and how it looks that in terms of the decision that the case for an increase is still relatively soon? chair yellen: my own judgment is
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looking at incoming economic data and developments thus far affecting the outlook that the evidence we have seen since we met in november is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up, so we indicated that the case had strengthened for an increase in the federal funds rate. to my mind, the evidence we have seen since that time remains consistent with the judgment the committee reached in november. obviously, there are many economic policies that congress and the administration will be considering in the months and years to come, and when there is greater clarity about the economic policies that might be put into effect, the committee will have to factor those
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assessments of those impacts on employment and inflation and perhaps just -- adjuster outlook , sonding on what happens many factors overtime affect economic outlook and the appropriate stance of policy that is needed to achieve our andmen -- our mandate unemployment objectives, but at this stage, i do think the economy is making very good progress toward our goals and that the judgment the committee reached in november still pertains. >> thank you. you suggested publicly that fiscal policy should play a role in stimulating economic growth. as i mentioned in my opening statement, and the new economic growth initiatives by the next congress and administration
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should include for counting on the effects of the economy. how would you balance the need to promote economic growth with a reality associated with deficit spending and high rising debt? i assume you're looking at some type of a balance. how can that be achieved? chair yellen: it is up to congress and the administration ofwaive costs in the fits fiscal policies that you will be considering. my advice would be that several principles should be taken into make thesethey judgments. first of all, the economy is operating relatively close to full employment at this point, where therast to economy was after the financial crisis when a large demand boost
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was needed to lower unemployment, we are no longer in that state. you mentioned the longer-term of fiscal outlook, cpl's assessments, and you know there are longer-term fiscal challenges that the debt to gdp ratio at this point looks likely to rise as the baby boomers retire in population and aging occurs in that longer run deficit problem needs to be kept in mind. in addition with the debt to gdp 77%, there's not a lot of fiscal space should shock to the economy occurred in that first shot that did require fiscal stimulus. i think one has been
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disappointing about the economy's performance over the really since the financial crisis or maybe going back before that is the pace of productivity growth that has been exceptionally slow. years, .5 of 1% 1.2year, the last decade, 5%. year, the previous two decades before that were about one percentage point higher, and that is what ultimately determines the pace of improvement in living standards, be as you consider fiscal policies, keep in mind and look carefully at the impact those policies are likely to have on the economy's productive capacity on productivity growth and to the maximum extent possible, cheese policies that -- choose policies that would improve that long-running growth and productivity outlook. you.ank
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my time is expired, so i will turn it to congresswoman maloney the questions. our soul and maloney crushed -- congresswoman maloney: thank you for your service and we will miss you. thank you. can you envision any you announce where your term as federal reserve chair? chair yellen: no, i cannot. i was confirmed by the senate for a four-year term, which ends at the end of january 2018, and it is fully my intention to serve that term. congresswoman maloney: thank you. the election outcome introduced your uncertainties that the markets in the private sector had not expected and priced in. how did these uncertainties affect the fed's decision in the next meeting?
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yellen: well, the markets try to anticipate what policies congress and the administration will put into effect, and we have seen some significant ,arket moves since the election in particular, longer-term treasury yields that abrupt about 40 basis points, and the dollar is strengthened about the .5% toward the -- about 3.5% toward the index. my interpretation would be that markets are anticipating that you will ultimately choose a fiscal package that involves a net expansionary stance of policy, and that in the context of an economy that is operating reasonably close to maximum employment within inflation such a back to 2%, that
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package could have inflationary consequences that the fed would be -- have to take into account in devising policy and the market responds is consistent with that view. our point of view, we do not know what is going to happen. there is a great deal of uncertainty right now. i would try to offer my assessment of where the economy is and what policy responses appropriate in the months ahead, given my current assessment. we will be watching the decisions that congress makes and updating our economic outlook as the policy landscape becomes clearer and taking into the shifts in the economic outlook for the appropriate stance of policy,
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but i think that is how i would interpret the market response. things could turn out differently. we understand. whatll simply watch decisions are made and factor them into our thinking going forward area congresswoman maloney: does the lack of information warranted away in raising the interest rate until the january meeting, when you will have more information? chair yellen: my guess is that uncertainty about these matters will last for some considerable in thend we have had accommodative monetary policy, i did think we have said -- the committee has had for a long time, that gradual increases in the federal funds rate are likely to be appropriate to
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and my our objectives assessment of where the economy is and how it has been operating and the fact that near-term risks do seem reasonably balanced. judgmenthink that the that the committee reached in november remains the appropriate one. maloney: one of the most significant responses to the financial crisis was passage of the dodd-frank law. today,sult of this law the financial system is stronger, safer and more stable. how do you feel about repealing dodd-frank? well, i agree with your assessment. we lived through a devastating financial crisis, and a high priority, i think, for all
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americans should be that we want to see put in place safeguards through supervision and regulation that result in the safer and sounder financial system. i think we have been doing that 's financial system is a consequence and is safer and sounder. many of the appropriate reforms are embodied in dodd-frank. we now have much higher capital than before the crisis. much more stringent liquidity derivatives, standardized derivatives are now subject to central clearing and derivatives cleared and uncleared are subject to margin requirements that increase their safety. we have a new liquidation authority.
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we are focusing on resolution to an ending too big to fail through the living wills process, rich i think is really changing the mindset of large -- ofial firms to back how they need to run businesses and making them safer and places, and dodd-frank emphasis on financial stability and we now have the group that meets all the regulators to consider threats to financials financiality -- the stability. i think dodd-frank is important in fostering those changes and we should feel glad that our financial system is now operating on safer and sounder footing. maloney: thank you. my time has expired but i ask quickly, there are concerns that the repeal would make another financial crisis more likely.
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chair yellen: i would not want to see all the improvements that -- i would in place not want to see the clock turned back on those because i do think they are important in the arts of another -- diminishing the odds of another financial service. congresswoman maloney: thank you for your service. our vice chairman. vice chairman: i am due to advise to individuals due to retire, and it has been an honor and privilege to serve with both of you. you have brought so much business expertise and chairman, forhere was a picture indiana nights, you would be that picture. it has been an honor and privilege to serve with you. you will be missed. i'm comforted only by knowing that your placement, my colleague, todd young, is as nice and is smart as you, so a great successor. >> he is actually smarter.
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[laughter] thank you for the compliment. vice chair: it has been an honor. chair yellen, thanks for your time. this month in "the wall street journal," it reported that for the first time in more than 30 years, banks, credit unions and other institutions share of the mortgage and fell below 50% because of banks leveraging -- thanks in risk and fear of legal and regulatory issues. while some lending has increased, banks have shifted to general mortgages and borrowers that have the best credit. loans to small businesses have lagged and new rules for credit cards may be hindering lending as well. president-elect trump has said that dodd-frank is -- i quote -- a tremendous burden to the banks and has expressed the same concerns that the banks are unable to lend to people who need it, people who want to start a new business or expand
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the current business, which has made us less competitive and has slowed growth. -- his view is shared by small and medium-sized business owners, community bankers and economists across the country. further, they released a study of the federal reserve's bank test procedures and had 15 recommendations to making improvements that go beyond what what was outlined as next steps. what are your responses in respect to the following issues -- the current state of bank lending, the constraining effects of regulation, generally , and stress tests, and finally, the impact on the economy's ability to grow and create jobs? do you plan on adapting a stress improvingmendation on transparency, model design and management and cost benefit analysis? asked, if youat i
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cannot respond to today, i certainly understand. if you could reply and writing, we would appreciate it. chair yellen: let me take a shot at replying and if there is something i do not cover, i would be glad to respond. let me just start by saying something about the burdens on community banks. community banks play a very important role in our economy in lending, understanding the conditions and their communities and providing lending that supports economic growth and it is really critical that they be able to function and to thrive. we recognize, we talked to community bankers regularly and recognize the burdens that they are operating under our significance and want to do everything that we can to reduce those burdens and to simplify
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the compliance regime for those banks. we have taken many steps on our role to reduce the burdens of our supervision and we are contemplating ourselves, the regulators are working on assible proposals for simplified capital regime that would apply to smaller community banks, so i completely agree those banks play critical roles and we need to focus on reducing burdens. now, of the dodd-frank rules, many of them apply particularly to the larger financial institutions, and the most significant increases in capital requirements, including surcharges for the largest capital surcharges to the largest firms that create the
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greatest systemic risk, the burdens of stress tests, and other regulatory requirements that i doose firms think pose potential threats to financial stability, and it is important that those institutions maintain higher standards of safety and soundness. test inioned the stress gao's finding. stress tests have been central to the federal reserve's efforts to increase capital and insured capital planning in large, systemic financial institutions that capital planning takes into account an accurate assessment over the risks that could strike
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banks, and the gao and the review found generally that these stress tests are effective , useful, and they suggested some changes, many of which we had already considered or had underway and the suggestions are intend to pick them up or look carefully at it, so it was a useful report, but bottom line, it concludes that are stress test regime has resulted in a very substantial improvement to safety and soundness. i should say that we recently thatut a new regulation will reduce the burden of stress test regime on institutions
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between 10 billion and 250 billion in size or i guess 50 and thatnd 250 billion those institutions will no longer be subject to the quality -- the qualitative part of our c-car capital review process that we will no longer object to capital distributions based on qualitative evaluation of their capital plan process and we will look at that capital planning process to normal supervisory methods, and i think that will reduce burden on a number of large, but smaller, institutions subject to the stress test. finally, a new asked me about brokerages. i think mortgages and standards have tightened up and there are
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hours that are finding it difficult with lower credit ratings to obtain mortgage credit. i think it is a consequence of the financial price -- crisis regulations and greater caution of crisis. i don't think we want to go back to the mortgage lending standards we had between the first decade of the century that led to the financial crisis, but they certainly have increased on small business lending. i think my assessment there would be that it remains largely available and that banks find, and this is something you also see in surveys, that the demand from small businesses has not been very robust in recent years. in part, i think they see their sales are not growing
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sufficiently rapidly to justify much borrowing, certainly the community banks and other banks that we talked to and monitor suggest that they stand ready and have adequate resources to support additional lending to smaller businesses, but there is the question to whether that is a demand or supply. .ep. tiberi: thank you i have been alerted the house has been called for a vote, but we would love for you to vote. we will come back and we will keep your place. my senators, as i look down the line, are smiling because that means they move up on the list. [laughter] let's see. senator, you are next on the list.
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vote, come back and we would love to have you back. we'll keep you on the list. >> thank you very much. is a follow-up on representative berry's question on community banks. you and i have discussed that many times and that will put some additional questions on the record. i am concerned about the status of community banks and what has been happening the last few years. i wanted to start with the question of the importance of independence of the central bank . i know you cannot comment on political goings-on, but there was campaigning in the last year and the federal reserve was discussed a few times. on the comment importance of preserving independence of the federal reserve banks from interference by the executive branch of the legislative branch and what that would mean for monetary policy effectiveness if there wasn't independence at the bank? chair yellen: thank you.
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i think independence by the central bank to make tactical implementation of monetary policy subject to congressional mandate, which we have, obviously, we are accountable to congress. congress is established goals -- has established goals for us in price stability and maximum employment, but it is important the central bank have the ability to make judgments about how best to pursue those goals while being accountable for explaining its decisions and transparence in decision-making. around the world in recent decades has gained this independence and economic outcomes that have resulted in
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this trend toward central bank independence and we have seen much better macro economics. that banks that have that sense of independence, there have been improvements in the countries? chair yellen: yes, clear evidence of better outcomes in countries were central banks can take the long view are not subject to short-term political pressures. sometimes, central banks need to do things that are not immediately popular for the health of the economy. we have really seen terrible economic outcomes in countries where central banks have been subject to political pressure. often, it is the case when a country is not able to balance its budget and running large deficits and finding it hard to finance those deficits, how can you finance it? you realize you can go to the central bank and force it to buy
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the debt that is being issued. the story never country is the experiences high, were even hyperinflation is one where the central bank has been forced to have been found to dictate the government that is compromising its independence, so markets come to expect low and stable inflation from the central bank that has political independence, and could economic performance, and i believe we have seen that in the united states and globally. >> thank you. we have the goal of maximum employment and price stability. there have been some talks of eliminating one of the goals and focusing on price stability. there have also been comments to have the fed target a growth rate for the economy. what do you think would be the
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effect of that, either limit the fed's focus to stabilizing prices and get rid of the two of mandate, or putting in an targeting certain growth rate? yellen: i am a strong believer in the fed stool -- fed's dual mandate. it is up to congress what are mandate should be, but i believe pricedth of these ability, the rate of inflation with that low in staple and employment matter greatly to the .merican people they both impact the welfare of households and individuals in this economy to a great extent, and i think they are both appropriate goals. price stability is the goal of every central bank, most central banks also take employment or site performance into account in achieving it.
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really, there is rarely any conflict between pursuing these two objectives, so it is not commonly the case that they could be in conflict, but most of the time, they are not. if you think about what we have faced, the federal reserve in the aftermath of the crisis, we have had very high unemployment that we wanted to bring down as rapidly as possible, and inflation has been almost consistently below are 2% objective, so our efforts to put in place the highly accommodative policy were directed toward achieving both of those goals, and they have not been in conflict. with respect to a growth rate objective, we cannot independently, if we are to ,chieve our inflation objective
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simply choose some arbitrarily chosen growth rate objective and try to achieve it. if we try to do that and it is withhat is not consistent the underlying productive potential of the economy and the basedy's ability to grow on changes and technology and capital and labor overtime, we would end up with an economy that either has inflation above acceptable levels are conceivably deflation of the target were chosen to low. >> thank you. my questions are on the record with infrastructure, funding in the effective of the economy, something the president-elect has discussed, and the positive of doing that, and incoming equality and some of your views on that. thank you very much. senator, i know members of
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the committee will miss your presence as you are moving to greater responsibility. >> i may still be on the committee, but yes. the front of the line, thank you. >> congressman hannah? congressman hannah: we talked about dodd-frank. prior to dodd-frank, the federal reserve examined responsibility for the safety and soundness of money and consumer protection oversight. dodd-frank move that over to c fpd, yet, in 2015, the l.a. times reported that wells fargo would cross selling pressures on consumer bankers and was encouraged and encouraging fraud. wells fargo paid $185 billion in fines, and i noticed this is a hypothetical, but i am curious, so dodd-frank in this instance
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miss this, and it is a profound it would have made any difference if it was left with the federal reserve? cooperatedn: we have historically with the regulatory agencies to engage in in this case,and the consumer financial protection bureau was involved. the controller, currency, most of the abuses that occurred when the national bank, where the comptroller of the currency also had some responsibilities that so been historically true, you know they did find these problems. they have significant fines to put in place enforcementect the.
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at the ofe looked city very we were -- that city very we were then respond -- the city very we were then responsible for, independent mortgage company and found that we find wells fargo for input in place enforcement actions. i think we have all worked together pretty constructively .o try to address abuses i would say that we go forward in the institutions that we supervised our statements for banks and are looking to see if there are similar practices that with cause problems and the holding companies, we supervised the largest institutions, and we have undertaken a thorough,
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horizontal review of compliance practices, but we do work constructively in -- and code -- and corrupt -- and collaboratively. so in response to dodd-frank -- chair yellen: there are many agencies involved in supervision and we do try to work constructively together. i think we have had a good working relationship with those other agencies, so i would not want to look at criticism there. , studentusly discussed debt, the massive amount, and how that impacts starting a family, having a home, doing all of those things that people do in the much younger age. how do you take into account -- how does the fed take into account when they consider all the things that they look at?
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it is somewhat like consumer debt out there, this trillion dollar number that is haunting and taking over everyone's head, deal abouts the fed it going forward? chair yellen: we have been attentive to transit student debt and it really has escalated to an extraordinary degree. there is a good deal of research that is trying to determine whether or not student debt householdbt burdens formation. household formation has been very low. the number of young people who are purchasing new single-family homes has been quite depressed, and we have seen less of a recovery in the housing sector and pick up in housing starts
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and then we would have expected multi families been quite strong, but single-family's constructions have been depressed. there are a number of factors attributing to that. that is some research suggests student debt is a factor that is leading to the to brought reduced willingness of millennials to buy single-family homes, their leader getting -- have more student debt, it is difficult to the mostexactly what important drivers are, but that could be one of them. >> thank you. it is interesting how we studied things. bob dylan said it is only a weatherman who knows how the wind blows and we spend a lot of times figuring out what is
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obvious but thank you for your time today. thank you congressman. senator peters? senator peters: thank you, chairman coats. it has been a pleasure and an honor to be under this committee with you and i wish you well in your future endeavors. it is wonderful to be with you here today and thank you for taking the time. i certainly know that you shapesand how politics democracy and sometimes in unpredictable ways, and we have to be prepared for that. that always seems clear but stands out is that americans care about the economy, usually first and foremost, and they're concerned about their pocket books, their futures, they want jobs, growth, better chance for the children, and while politics that should by democracy to not always follow predictable patterns, all of us need some measure of stability and certainty, be it
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markets, consumers, favors, spenders, professionals of the list as it goes on. obama,phrase president it remains in ocean minor, not a speedboat, but there remains a lot of question and level of uncertainty i just want to say how much i appreciated your comments on the independence of the fed and the necessity for that monetary policy has been and must continue to be a balance and a complement to fiscal policies of the federal government. i also think unfounded the policieshat are somehow political in nature can be one of the most damaging claims that can happen in a modern democracy. certainly, as policymakers, i believe we have a role to express our views on monetary

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